EXECUTIVE SUMMARY

This Management's Discussion and Analysis of Financial Condition and Results of Operations relates to and should be read together with our Audited Consolidated Financial Statements as of and for each of the years in the three-year period ended December 31, 2012. Therefore, unless otherwise noted, the discussion below of our financial condition and results of operations is for Southern Copper Corporation and its subsidiaries (collectively, "SCC," the" Company," "our," and "we") on a consolidated basis for all periods. Our financial results may not be indicative of our future results.

This discussion contains forward-looking statements that are based on management's current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in the forward-looking statements as a result of a number of factors. See Item 1 "Business" - "Cautionary Statement."

EXECUTIVE OVERVIEW

Business: Our business is primarily the production and sale of copper. In the process of producing copper, a number of valuable metallurgical by-products are recovered, which we also produce and sell. Market forces outside of our control largely determine the sale prices for our products. Our management, therefore, focuses on value creation through copper production, cost control, production enhancement and maintaining a prudent capital structure to remain profitable. We endeavor to achieve these goals through capital spending programs, exploration efforts and cost reduction programs. Our aim is to remain profitable during periods of low copper prices and to maximize financial performance in periods of high copper prices.

We are one of the world's largest copper mining companies in terms of production and sales with our principal operations in Peru and Mexico. We also have an active ongoing exploration program in Chile and in 2011 we started exploration activities in Argentina and Ecuador. In addition to copper we produce significant amounts of other metals, either as a by-product of the copper process or in a number of dedicated mining facilities in Mexico.

Net sales value in 2012 of $6.7 billion was only 2.2% lower than 2011 sales, which were the highest in our Company´s history even though the average copper price in 2012 was 10% lower and the prices for all our major by-products were lower, as well. This accomplishment was due to production increases in copper, silver and zinc. Net income decreased by about 17% as a result of the lower prices and the one time court ordered legal fee payment of $316.2 million. Without the deduction for these legal fees, 2012 net earnings would have been $2.3 billion a decrease of 3.7% from our record year of 2011. Our Buenavista mine, which is enjoying a stable work environment, reached a new production record of 200,070 tons of copper. In 2012, we invested $1,051.9 million in capital programs along with $48 million in our exploration efforts. We believe this commitment to growth will continue to benefit our Company, our investors, our neighboring communities, and the countries in which we operate.

We believe we hold the world's largest copper reserve position. Our copper ore reserves, at December 31, 2012, totaled 67.1 million tons of contained copper, calculated at a copper price of $2.00 per pound (as of December 31, 2012, the LME and COMEX copper price was $3.59 and $3.64, respectively), as follows:

Copper contained in ore reserves   Thousand tons
Mexican open-pit                          31,177
Peruvian operations                       25,589
IMMSA                                        213
Development projects                      10,086
Total                                     67,065

Outlook: Various key factors will affect our outcome. These include, but are not limited to, some of the following:

† Changes in copper and molybdenum prices: The average LME and COMEX copper price was $3.61 per pound in 2012, about 10% lower than in 2011. Average silver and zinc prices in 2012 decreased about 11% and molybdenum decreased about 18% compared to 2011.

† Sales structure: In the last three years approximately 75.7% of our revenues came from the sale of copper, 9.0% from molybdenum, 7.0% from silver and 8.3% from various other products, including zinc, sulfuric acid, gold and other materials.

† Metal markets: During the fourth quarter 2012 metal markets continued to be driven by the negative macroeconomic events that affected consumer expectations, the more significant being Europe's debt crisis, the "fiscal cliff" that affected the U.S. economy and the slowdown of China's economy. 2012 was also a transition year, with administration changes or elections in several key countries, including China and the United States.

We believe the copper market fundamentals are sound, however, demand has been affected by macroeconomic factors and the economic slowdown noted in the previous paragraph. At present, we perceive a more positive environment as some of these matters have been solved or are perceived to have a more positive outlook from now on.

In China, after several monetary easing measures were taken in the second half of 2012, some analysts expect growth in Chinese copper demand of approximately 8.5%, for 2013, better than the 5% growth estimated for 2012. According to them, China represented 41% of the world demand in 2012. The expected strong growth in China and other emerging economies should give support to the copper market in 2013.

In the United States demand appears to be stronger as consumer confidence has increased and the economy is recovering. This has been reinforced by positive news related to housing and employment that seem to have offset concerns related to the fiscal balance. Even though the United States represents today about 8% of the world demand for refined copper, the recovery of its economy is key to copper demand since the United States is the most important secondary copper consumer, affecting copper demand in other economies. Finally, after a severe 2012, where European demand is estimated to have decreased by approximately 7%, there are signs indicating a copper demand increase of 2%. It should be mentioned that Europe now represents approximately 19% of the world demand for refined copper.

On the supply side, we understand that several structural factors, such as labor stoppages, technical problems and other issues are still affecting copper supply, which we believe will very likely result in weak supply growth in 2013, even though we will see several projects coming into operation by year-end or in 2014. We believe SCC is positioned to take advantage of this unsettled situation, through our investment program of organic growth, aimed at increasing production from our current capacity of 640,000 tons to 1.2 million tons by 2017.

† Molybdenum: we saw a 2.6% molybdenum demand growth in 2012, which helped to reduce the surplus of supply to demand from approximately 8% to 6%. We expect that in 2013 the balance between supply and demand will continue reducing the market surplus, thereby improving molybdenum prices in the near future.

† Silver: we believe that silver prices will have strong support due to its industrial uses as well as being perceived as a value shelter in times of economic uncertainty.

† Zinc: we also believe that zinc has very good long term fundamentals due to its significant industrial consumption; however, inventories are currently at a relatively high level, which tends to maintain a relatively weak zinc price.

† Production: For 2013, we are currently expecting a copper production of 650,000 tons of which approximately 10,000 tons would be from third party copper. We expect molybdenum production in 2013 to be about 19,800 tons including approximately 1,700 tons from our new molybdenum plant at Buenavista. Additionaly, in 2013 we expect to produce and sell 16.3 million ounces of silver and produce 99,100 tons of zinc.

† Capital Expenditures: Capital expenditures were a record of $1,051.9 million for 2012, 71.6% higher than in 2011. The increase reflects our strong commitment to the Company's expansion programs at Buenavista and other properties. In

2012, $615.6 million was invested in our Buenavista projects. In 2013 we will continue our investment program to increase copper production capacity by approximately 84% by 2017, from 640,000 tons to 1.2 million tons.

SCC shareholder derivative lawsuit: On October 9, 2012, we received from AMC, our majority shareholder, $2.1 billion in satisfaction of the judgment issued pursuant to the decision of the Court of Chancery of Delaware, which concluded that we paid an excessive price to AMC in the 2005 merger between the Company and Minera Mexico, S.A. de C.V. From the aforementioned sum received from AMC, we paid $316.2 million to the plaintiff's attorneys to satisfy the court ordered award of attorneys' fees and expenses. The effect of these transactions was recorded in our 2012 results. The payment of $316.2 million attorney´s fees was recorded as an operating expense and the receipt of $2.1 billion was recorded in equity as additional paid-in capital.

Financing: On November 8, 2012, we issued $1.5 billion of fixed-rate unsecured notes with a discount of $22.5 million, which is being amortized over the term of the related debt. This debt was issued in two tranches, $300 million due in 2022 at an annual interest rate of 3.5% and $1.2 billion due in 2042 at an annual interest rate of 5.25%. Net proceeds are being used for general corporate purposes, including the financing of our capital expenditure program.

Changes in credit risk: On December 3, 2012 Fitch Ratings upgraded the Company's unsecured debt ratings from BBB to BBB+. Additionally, Standard & Poor's Ratings Services and Moody's Investor Services aligned and confirmed SCC debt rating by assigning 'BBB' and Baa2, respectively, to the new notes issued.

Tantahuatay: The Tantahuatay mine is located in Cajamarca, in northern Peru. Production started in August 2011 and the mine produced 140,262 ounces of gold and 914,241 ounces of silver in 2012. For 2013, the current plan is to produce 116,300 ounces of gold and 476,000 ounces of silver. We hold a 44.2% interest in this mine. In 2012, we have recognized $48.7 million in earnings (see caption Equity earnings of affiliate, on our Statement of Earnings) for our share of the net income of the mine.

Peru labor negotiations: We conducted negotiations with eight Peruvian unions whose collective bargaining agreements expired in 2012. During the first two months of 2013, we have signed three-year agreements with all the unions.The agreements include, among other things, annual salary increases of 6.5%, 5% and 5% for each of the three years, respectively, for all workers.

There were no strikes during 2011 and 2010. On December 24 and 25, 2012, the three major unions held a two-day illegal work stoppage which did not have a material impact on production.

KEY MATTERS

We discuss below several matters that we believe are important to understand our results of operations and financial condition. These matters include
(i) earnings, (ii) production, (iii) "operating cash costs" as a measure of our performance, (iv) metal prices, (v) business segments, (vi) the effect of inflation and other local currency issues, and (vii) our capital investment and exploration program.

Earnings: The table below highlights key financial and operational data of our Company for the three years ended December 31, 2012:

                                                2012      2011      2010
Net sales (in millions)                        $ 6,669   $ 6,819   $ 5,150
Net income attributable to SCC (in millions)   $ 1,935   $ 2,336   $ 1,554
Earnings per share                             $  2.28   $  2.73   $  1.81
Dividends per share                            $  4.06   $  2.43   $  1.66
Average LME copper price                       $  3.61   $  4.00   $  3.42
Pounds of copper sold (in millions)              1,415     1,320     1,106

Prices for copper and all our major by-products were lower in 2012 and we absorbed a charge of $316.2 million in 2012 for legal fees paid in connection with the SCC shareholder derivative litigation. Because of higher production and sales volume of our metals we were able to record good results for 2012, with net earnings of $1.9 billion.

Production: The table below highlights, mine production data of our Company for the three years ended December 31, 2012:

                                 2012    2011    2010
Copper (in million pounds)       1,406   1,295   1,055
Molybdenum (in million pounds)      40      41      45
Zinc (in million pounds)           198     185     219
Silver (in million ounces)          14      13      13

2012 compared with 2011:

Mined copper in 2012 increased 111 million pounds, compared to 2011 production. The 8.5% increase was due to higher production at our Mexican mines and includes an additional 60.8 million pounds at the Buenavista mine, which had record production in 2012, 15.5 million pounds at the La Caridad mine, and 41.1 million pounds of higher production at the Cuajone mine. These increases in production were the result of higher ore grades and recoveries, and were partially offset by lower production at the Toquepala mine, whose production decreased by 2.2% mainly due to lower PLS copper grade and volume processed at the SXEW plant.

Molybdenum production decreased slightly in 2012, compared with 2011, due primarily to 2.0 million pounds of lower production at the Toquepala mine, as a result of lower ore grades and recoveries, offset by 1.2 million pounds and 0.2 million pounds of higher production at La Caridad mine and Cuajone mine, respectively.

Zinc mine production, which comes from our IMMSA unit in Mexico, increased by 13.4 million pounds in 2012, 7.3% higher than in 2011, mainly as a result of higher recoveries and the production recovery at the Santa Eulalia mine after the flooding problems of prior years were resolved.

Our silver production increased 7.2% in 2012, principally due to higher production at the Buenavista mine and the Cuajone mine, offset somewhat by lower production at some of our other mines.

2011 compared with 2010:

Mined copper in 2011 increased 240 million pounds or 22.8% over the 2010 production principally due to higher production at our Buenavista mine. The Buenavista mine restored full capacity in the second quarter of 2011 and increased production by 335 million pounds. Decreases at our Peruvian mines of 85 million pounds, largely from lower ore grade at the Cuajone mine and a decrease of 10 million pounds at La Caridad mine, due to lower grades and recoveries, partially offset the increase from Buenavista.

Molybdenum production decreased by approximately 4 million pounds in 2011, 9.5% lower than in 2010, due primarily to 5.5 million pounds of lower production at the Cuajone mine, partially offset by 1.2 million of higher production at the Toquepala mine both due to changes in recoveries, and lower ore grades at Cuajone mine.

Zinc mine production, which comes from our IMMSA unit in Mexico decreased by 34 million pounds in 2011, 15.5% lower than in 2010, principally due to no production at the Santa Eulalia mine, as a result of a flooding caused by heavy rains, and decreases in production at the Santa Barbara and Charcas mines of 19 million pounds mainly due to lower ore grades.

Our silver production increased slightly in 2011, principally due to higher production at the Buenavista mine mostly offset by lower production at some of our other mines.

Operating Cash Costs: An overall benchmark used by us and a common industry metric to measure performance is operating cash costs per pound of copper produced. Operating cash cost is a non-GAAP measure that does not have a standardized meaning and may not be comparable to similarly titled measures provided by other companies. A reconciliation of our operating cash cost per pound to the cost of sales (exclusive of depreciation, amortization and depletion) as presented in the consolidated statement of earnings is presented under the subheading, "Non-GAAP Information Reconciliation," on page 96.

We have defined operating cash cost per pound as cost of sales (exclusive of depreciation, amortization and depletion), less the cost of purchased concentrates, plus selling, general and administrative charges, treatment and refining charges, net

revenue (loss) on sale of metal purchased from third parties and by-product revenues, and sales premiums; less workers' participation and other miscellaneous charges, including the Peruvian royalty charge, the special mining tax and the change in inventory levels; divided by total pounds of copper produced by our own mines. In our calculation of operating cash cost per pound of copper produced, we credit against our costs the revenues from the sale of by-products: molybdenum, zinc, silver, gold and other minor by- products and the premium over market price that we receive on copper sales. We account for the by-product revenues in this way because we consider our principal business to be the production and sale of copper. We believe that our Company is viewed by the investment community as a copper company, and is valued, in large part, by the investment community's view of the copper market and our ability to produce copper at a reasonable cost. We also include copper sales premiums as a credit, as these amounts are in excess of published copper prices. The increase in recent years in the price of molybdenum, as well as increases in the prices of silver and zinc, have had a significant effect on our traditional calculation of cash cost and its comparability between periods. Accordingly, we present cash costs with and without crediting the by-product revenues against our costs.

We exclude the cost of purchases of third party copper material. From time to time we purchase copper concentrates on the open market in order to maximize the use of our metallurgical facilities or to take advantage of an attractive market situation. We view these purchases on an incremental basis and measure the results incrementally. We find that the inclusion of these purchases with our own production often creates a distortion in our unit cost. Accordingly, we include only the net effect of these purchases as a by-product credit, so that only the net revenue or loss from the transaction is included in the calculation. We believe this will allow others to see a truer presentation of our cash cost, which we consider is one of the lowest of copper producing companies of similar size.

We exclude from our calculation of operating cash cost depreciation, amortization and depletion, which are considered non-cash expenses. Exploration is considered a discretionary expenditure and is also excluded. Workers' participation provisions are determined on the basis of pre-tax earnings and are also excluded. Additionally excluded from operating cash costs are items of a non-recurring nature and the mining royalty charge and special mining tax.

Our operating cash costs per pound, as defined, are presented in the table below for the three years ended December 31, 2012.

                                          Year                             Variance
(Dollars per pound)          2012         2011         2010        2012-2011      2011-2010
Operating cash cost per
pound of copper
produced without
by-products revenue        $   1.796    $   1.759    $   1.620    $     0.037    $     0.139
Add: by-product
revenues                   $  (1.083 )  $  (1.242 )  $  (1.340 )  $     0.159    $     0.098
Operating cash cost per
pound of copper
produced                   $   0.713    $   0.517    $   0.280    $     0.196    $     0.237

2012 compared with 2011:

As seen on the chart above, operating cash cost per pound of copper before by-product credits was 3.7 cents per pound higher than in 2011, an increase of 2.1%, mainly due to increases in fuel and power cost. Operating cash cost per pound, net of by-product credits, was 19.6 cents per pound higher than in 2011, largely as a result of lower prices for our major by-products, which decreased between 11% and 18% in the period.

2011 compared with 2010:

Our cash cost per pound , excluding by-product revenues, was higher by 13.9 cents per pound in 2011, compared with 2010, principally due to higher production cost, mainly power and fuel cost due to increased market prices, labor due to salary increases and repair costs, partially offset by the higher production from the Buenavista mine.

Our cash cost per pound for 2011 when calculated with by-product revenues was 51.7 cents per pound, compared with 28.0 cents per pound in 2010. The increase was due to some cost inflation, mainly fuel and power and lower by-product credit largely due to lower molybdenum sales volume and price.

Metal Prices: The profitability of our operations is dependent on, and our financial performance is influenced by, the international market prices for the products we produce, especially for copper, molybdenum, zinc and silver. Metal prices

historically have been subject to wide fluctuations and are affected by numerous factors beyond our control. These factors, which affect each commodity to varying degrees, include international economic and political conditions, levels of supply and demand, the availability and cost of substitutes, inventory levels maintained by producers and others and, to a lesser degree, inventory carrying costs and currency exchange rates. In addition, the market prices of certain metals have on occasion been subject to rapid short-term changes due to financial investments.

We are subject to market risks arising from the volatility of copper and other metals prices. Assuming that expected metal production and sales are achieved, that tax rates are unchanged and giving no effects to potential hedging programs, metal price sensitivity factors would indicate the following change in estimated 2013 net income attributable to SCC resulting from metal price changes:

                                        Copper      Molybdenum       Zinc         Silver
Change in metal prices (per pound
except silver - per ounce)            $     0.01    $      1.00    $    0.01    $     1.00
Change in net earnings (in
millions)                             $      8.0    $      25.7    $     1.3    $      9.6

Business Segments: We view our Company as having three operating segments and manage it on the basis of these segments. These segments are (1) our Peruvian operations, (2) our Mexican open-pit operations and (3) our Mexican underground operations, known as our IMMSA unit. Our Peruvian operations include the Toquepala and Cuajone mine complexes and the smelting and refining plants, industrial railroad and port facilities which service both mines. The Peruvian operations produce copper, with significant by-product production of molybdenum, silver and other material. Our Mexican open-pit operations include La Caridad and the Buenavista mine complexes and the smelting and refining plants and support facilities, which service both mines. The Mexican open-pit operations produce copper, with significant by-product production of molybdenum, silver and other material. Our IMMSA unit includes five underground mines that produce zinc, lead, copper, silver and gold, a coal mine which produces coal and coke, and several industrial processing facilities for zinc, copper and silver.

Segment information is included in our review of "Results of Operations" and also in Note 19 "Segment and related information" of our consolidated financial statements.

Inflation and Exchange Rate Effect of the Peruvian Nuevo Sol and the Mexican Peso: Our functional currency is the U.S. dollar. Portions of our operating costs are denominated in Peruvian nuevos soles and Mexican pesos. Since our revenues are primarily denominated in U.S. dollars, when inflation/deflation in Peru or Mexico is not offset by a change in the exchange rate of the nuevo sol or the peso, respectively, to the dollar, our financial position, results of operations and cash flows could be adversely affected to the extent that the inflation/exchange rate effects are passed onto us by our suppliers or reflected in our wage adjustments. In addition, the dollar value of our net monetary assets denominated in nuevos soles or pesos can be affected by exchange rate variances of the nuevo sol or the peso, resulting in a re-measurement gain or loss in our financial statements. Recent inflation and exchange rate variances are provided in the table below:

                                                       Years Ended December 31,
                                                      2012       2011        2010
Peru
Peruvian inflation rate                                 2.6 %       4.8 %      2.1 %
Nuevo sol/dollar appreciation / (devaluation) rate      5.4 %       4.0 %      2.8 %
Mexico
Mexican inflation rate                                  3.6 %       3.8 %      4.4 %
Peso/dollar appreciation / (devaluation) rate           6.9 %     (13.1 )%     5.4 %

Capital Investment Program

We made capital expenditures of $1,051.9 million, $612.9 million and $408.7 million in 2012, 2011 and 2010, respectively. In general, the capital expenditures and investment projects described below are intended to increase production and/or decrease costs.

The table below sets forth our capital expenditures for the three years ended December 31, 2012 (in millions):

                                           2012            2011            2010
Peruvian projects:
Tia Maria - Arequipa                   $        7.8    $        1.6    $      152.5
Toquepala expansion projects                   32.7            76.0            32.8
Cuajone expansion projects                     52.0            38.9            18.8
Tailings disposal - Quebrada Honda
dam                                             1.3             0.7             3.3
Ilo smelter modernization
(including marine trestle)                        -               -             1.6
Ilo power transmission substation              11.9             9.8               -
Sub-total projects                            105.7           127.0           209.0
Maintenance and replacement                   152.2            78.5            55.2
Total Peruvian expenditures                   257.9           205.5           264.2

Mexican projects:
Buenavista mine expansion              $      216.3    $       97.4    $          -
New Buenavista concentrator                   149.0             7.7               -
. . .